www.fad.kz The Role of Microfinance in Financial Inclusion: Kazakhstan IDB – ADFIMI Joint CEO Seminar, 23 June 2014 CEO of “Fund for financial support of agriculture” JSC – Narmukhan Sarybayev
www.fad.kz
The Role of
Microfinance in
Financial Inclusion:
Kazakhstan
IDB – ADFIMI Joint CEO Seminar, 23 June 2014
CEO of “Fund for financial support of agriculture” JSC – Narmukhan Sarybayev
Financial inclusion. What do we mean?
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Deposits
Loans
Microloans Payment
and Cash
services
Insurance
Leasing
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Worldwide, approximately 2.5 billion people do not have a formal account at a financial institution.
East Asia
Pacific region
55%
Adults above 15 age with an account at a formal financial institution
Source: World Bank, 2011
East Europe and
Central Asia
45%
Latin America and
Caribbean
39%
Middle East and
North Africa
18%
South Asia
33%
Sub-Saharan Africa24%
Countries with a high
incomes
89%
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East Asia
Pacific region
9%
Adults obtaining a new loans from a formal financial institution
East Europe and
Central Asia
8%
Latin America and
Caribbean
8%
Middle East and
North Africa
5%
South Asia
9%
Sub-Saharan Africa 5%
Countries with a high
incomes
14%
Source: World Bank, 2011
5 Source: World Bank
The main barriers to access
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Why it is not the banks?
Socially vulnerable
population
Irregular incomes
Lack of the credit history
Lack of collateral
Illiteracy (including financial illiteracy)
High costs due to the small size of the loans and remoteness from cities
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The role of MFI
Level of Income
Gender Residence Age Education
MFI is an effective instrument of reducing barriers
BUT!!!
High cost of services
Risk of further clients
economic situation
deterioration and over
indebtedness of the
borrowers
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Possible solutions of the problems
Innovation to the business
processes
Mobile banking
Microfinancing in accordance
with Islamic principles, in which
the risk of default is shared
between the lender and the
borrower
Development of Credit Bureau
Monitoring of MFI activities
High cost of services
Risk of further clients
economic situation
deterioration and over
indebtedness of the
borrowers
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The role of the government
Infrastructure development
• Financial institutions support with the aim to improve accessibility of financial services to socially vulnerable population
• Credit bureaus development
• Providing opportunities to expand financial services
Regulation of financial sector
• Monitoring of financial institutions with the delineation of the provided services
• Consumer protection
• Competition protection
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Three-tier credit system in Kazakhstan
1 Level:
Banks
3 Level:
MFI
2 Level:
Credit
Unions,
Mortgage
companies,
NBFI
Services: Payment
and Cash services,
deposits,
loans, leasing, safe
deposit services,
payment and credit
cards, mobile and
internet banking;
Coverage: urban
population , population
with middle and high
level income
Services: Microloans, leasing;
Coverage: urban population, population with
middle and low level income, self-employed
population, insignificant coverage of rural population
Credit Unions – loans,
deposits, leasing
to Credit Unions
members; cover medium
and upper level farmers
NBFI – services and
coverage depend on the
companies aims
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Evaluation of the rural population coverage level
1 864 698
279 705
Number of households
in rural areas
Demand evaluation for
loans in rural areas (15%
from households)
FFSA direct lending
Active borrowers – 19 395
Financing via MFI – FFSA’s
borrowers
Active borrowers – 5 988
Total coverage – 126 069 rural population
Uncovered rural households – 153 636 unit.
Financing via other MFI
Active borrowers –
100 686
Coverage of rural population
DEMAND – 279 705 households
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FFSA’s participation at financial infrastructure development
Financial support
Lending
Monitoring
Rehabilitation
Non-financial support
Corporate governance
Training, consulting,
diagnostics and process automation
Investment and external borrowings search
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New measures of rural MFI support
Financial support
measures:
Non-financial support
measures:
• MFI lending without collateral
under the existing loan
portfolio of MFIs;
• Loan guarantees to MFI at
other organizations and
second-tier banks;
• Subsidizing interest rates for
MFIs
•Introduction of project managers
in the regions to oversee MFI
activities;
• Range of consulting services,
technical diagnostics and
monitoring of MFI;
• Strengthening MFI human
capacity;
• Creating communication and
information area for MFI
themselves, investors, customers
and etc., which includes:
- Creation of a single automated
system.
- Creation of a single microfinance
portal
INCREASING COVERAGE LEVEL
OF RURAL POPULATION
MFI
Loan guarantees
to MFI
Receivables assignment
Interest rate subsidies
Non-financial support
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Thank you for your attention!